Payback Period Calculator (VND)
The payback period answers the most instinctive question an investor asks before committing capital — a café fit-out, a delivery van, a unit to rent out: how long until I get my money back? It is usually the first metric people reach for because it is intuitive and measures liquidity risk directly. The longer a project takes to repay, the longer your cash is tied up and the more can go wrong before you see it again.
There are two ways to compute it, and the gap between them is the interesting part. Simple payback accumulates the annual cash inflows until they equal the outlay, treating a dong received in year 10 as worth the same as one today. For the illustrative case of a 500.000.000 VND outlay throwing off 120.000.000 VND a year, that comes to 4 years 2 months. But money arriving five years out is plainly worth less than money in hand now. Discounted payback fixes exactly that: it discounts each future inflow back to present value at a chosen rate — here an assumed 10%/year — before accumulating, and the answer stretches to 5 years 8 months, roughly 1.50 years longer than the naive figure.
The calculator above takes your initial investment, the annual cash inflow, a discount rate and a horizon, then plots the cumulative cash flow — both undiscounted and discounted — crossing the investment line. That crossover is the payback point. One caveat: the 10%/year rate and the level cash flow in the example are illustrative assumptions. Real projects have lumpy, uncertain cash flows, so enter figures that match your own plan.
How the calculator computes payback
Simple payback
We accumulate the cash inflows up to the year the running total reaches or exceeds the outlay, then interpolate the fractional part of that year:
Payback = (full years before recovery) + (shortfall remaining) / (cash flow in the crossing year)
| Symbol | Meaning |
|---|---|
| I | Initial investment (default 500.000.000 VND) |
| CF | Annual cash inflow (120.000.000 VND) |
| n | Horizon in years (10) |
With a level 120.000.000 VND/year, after four years you have recovered 480.000.000 VND — still 20.000.000 VND short, which the fifth year covers in 0.17 of a year. Together that is 4 years 2 months.
Discounted payback
Simple payback's flaw is that it ignores the time value of money. Discounted payback discounts each inflow to present value before summing:
PV(year t) = CF / (1 + d)^t, where d is the discount rate (10% = 0.1)
We then accumulate those present values until they reach the outlay, interpolating the crossing year the same way. Because each inflow is shrunk, the discounted running total climbs more slowly, so payback takes longer — 5 years 8 months versus 4 years 2 months. The discount rate d is usually your cost of capital or the minimum return you require.
What the model leaves out
Payback — even the discounted version — ignores every cash flow after the payback point. A project that repays slowly but earns handsomely later can score unfairly low. So use it as a liquidity-risk filter, then pair it with NPV and IRR to judge total profitability. The model also assumes level, certain cash flows and ignores tax and inflation.
Worked example: a 500.000.000 VND outlay returning 120.000.000 VND a year
Illustrative assumptions: a level 120.000.000 VND/year inflow over 10 years, a 10%/year discount rate (for illustration only), cash arriving at the end of each year.
| Year (t) | Cash flow | Cumulative (undiscounted) | PV = CF/(1.1)^t | Cumulative (discounted) |
|---|---|---|---|---|
| 1 | 120.000.000 | 120.000.000 | 109.090.909 | 109.090.909 |
| 2 | 120.000.000 | 240.000.000 | 99.173.554 | 208.264.463 |
| 3 | 120.000.000 | 360.000.000 | 90.157.776 | 298.422.239 |
| 4 | 120.000.000 | 480.000.000 | 81.961.615 | 380.383.854 |
| 5 | 120.000.000 | 600.000.000 | 74.510.559 | 454.894.412 |
| 6 | 120.000.000 | 720.000.000 | 67.736.872 | 522.631.284 |
| ... | ||||
| 10 | 120.000.000 | 1.200.000.000 | 46.265.195 | 737.348.053 |
Three things stand out.
- Simple payback lands at 4 years 2 months. By the end of year 4 the undiscounted total is only 480.000.000 VND, still 20.000.000 VND short of the 500.000.000 VND outlay; the fifth year closes that gap in 0.17 of a year.
- Discounted payback stretches to 5 years 8 months. The PV column shows that a year-5 inflow is worth only 74.510.559 VND in today's money, so the discounted total does not reach 500.000.000 VND until midway through year 6.
- The whole-life view. Over 10 years you collect 1.200.000.000 VND undiscounted — a nominal net gain of 700.000.000 VND on the 500.000.000 VND outlay — but in present-value terms those inflows are worth only 737.348.053 VND.
Try raising the discount rate to see how quickly discounted payback expands, then cross-check with FiMo's NPV and IRR calculators to confirm the project actually earns its keep after it has paid you back.
Frequently asked questions
What is the payback period?
The payback period is how long a project's cash inflows take to recover the initial investment. It measures speed of recovery and liquidity risk — the faster the payback, the less time your capital is exposed. Illustrative example: a 500.000.000 VND outlay returning 120.000.000 VND a year has a simple payback of 4 years 2 months.
What is the difference between simple and discounted payback?
Simple payback sums the cash inflows without regard to the time value of money — it treats a dong in year 10 as equal to one today. Discounted payback discounts each inflow to present value at a rate d before summing, so it is always longer. With the same 500.000.000 VND outlay and 120.000.000 VND/year, simple payback is 4 years 2 months, while discounted payback at 10%/year is 5 years 8 months.
What is the formula for payback period?
For level cash flows, Payback = full years before recovery + (remaining shortfall) / (cash flow in the crossing year). The discounted version replaces each cash flow with its present value, PV = CF/(1+d)^t, before accumulating. Example: after 4 years you have recovered 480.000.000 VND, still 20.000.000 VND short of 500.000.000 VND, closed in 0.17 of a year → 4 years 2 months.
What discount rate should I use?
The discount rate d is normally your cost of capital — the loan rate if the project is debt-funded, or the minimum return you require on your own equity. The 10%/year used in the example is an illustrative assumption. A higher rate shrinks future cash flows more, lengthening the discounted payback, so enter a rate that reflects how you actually fund the project.
Is a shorter payback period always better?
Not necessarily. A short payback means lower liquidity risk, but the metric ignores every cash flow after the payback point, so a project that repays slowly yet earns handsomely later can look worse than it is. Use payback as a first-pass filter, then combine it with NPV and IRR to weigh whole-life profitability before you decide.
What if the project never pays back within the horizon?
If the cumulative cash flow — simple or discounted — never reaches the initial outlay within the years you enter, the tool reports no payback within the horizon rather than inventing a number. That usually signals cash flows that are too small relative to the investment, or a discount rate that is too high. Extend the horizon, revisit your cash-flow forecast, or check the NPV — a negative NPV means the project is not worthwhile however you measure it.
How much does the project return over its whole life?
In the 10-year example you collect 1.200.000.000 VND undiscounted on a 500.000.000 VND outlay — a nominal net gain of 700.000.000 VND. But discounted at 10%/year, those inflows are worth only 737.348.053 VND in today's money. That gap is the price of time, and the reason to look at NPV alongside payback rather than payback alone.